By Muskan Arora
While a few may argue that ESG
detracts from investment returns, the CIO of $67 billion State of Maryland
Retirement and Pension System continues to build his portfolio allocations
through an ESG lens that he believes could survive which ever way U.S. elections
may sway the highly politicized issue.
In an exclusive conversation with
Markets Group, CIO Andrew Palmer spoke about investing in energy transition
through his growing infrastructure portfolio.
Though the number of managers and
the size of allocation is yet to be determined, the ticket sizes would range
$100 million and above.
“The number of managers and the
size of the allocation will be determined by how many good managers we find,”
Palmer told Markets Group.
“We are reviewing the opportunity
set,” he added.
With a focus on investing in the
development of greenfield spaces, Palmer is eyeing value added and opportunistic spaces over core strategies and “expect
to fund a mix of late stage development of greenfield spaces and operating
assets.”
“Being the part of the process
that is creating wind farms, creating solar farms, creating green hydrogen
plants and you build them and sell them to a long-term holder, would yield
higher reward,” said Palmer.
“We want the dollars to be going
in and creating a low carbon solution and then repeating that. We think this is
going to drive great returns and would be the most impactful,” said Palmer.
The system allocates 4% or $2.6
billion, within their real assets portfolio, against a target of 5% or $3.35
billion, as of September 2023.
The real assets portfolio sits at
15% or $10.05 billion against a target range of 11% or $7.3 billion to 19% or $12.7bn.
The fund roster includes Stonepeak Opportunities Fund and I Squared Global Infrastructure Fund
III among others.
The pension plan realised the
importance of increasing their allocation to their infrastructure sleeve after
attending an educational session on how climate impacts our return forecasts.
Maryland is also set to launch a
consultant search to evaluate whether it is possible and profitable for the
system to target dollars to in-state investments by examining the size of the
private markets in Maryland and the risk and return experience of those
investments.
